Seven years ago, the transportation service industry was shaken when Uber developed their unique on-demand car service technology. Since that time, the service has grown by leaps and bounds and faces one major competitor: Lyft. Although Uber still gives more rides than Lyft, the competitor is taking a huge step in exploring new auto technology.

Lyft recently announced that GM has made a major investment in the company; to the tune of $500 million. The idea is that to be truly competitive with Uber; they need to take a huge bite out of the biggest expense: drivers.

GM, Lyft, and Autonomous Vehicles

Remember the 2002 movie “Minority Report”? It was set at some time in the future where all vehicles drove themselves. You simply got in, and the car followed predetermined tracks to whisk you where you needed to go. While self-driving vehicles are still a long ways from zipping up the sides of buildings; the rest doesn’t seem too much like science fiction any longer.

Part of the deal between Lyft and GM is that Lyft would become the only rideshare service that utilized self-driving cars. In theory, it should help both companies capture markets they were yet unable to capture.

What the Partnership Means for the Automotive Industry

Back in 2009, the automotive industry was struggling. It was struggling so badly that GM had to take a $50 billion bailout. As the overall US economy recovered, so did the automotive industry, but they recognized the need to change up their business plan. Simply making and selling cars is no longer going to cut it in today’s technology based world.

One of GM’s biggest motivations for partnering with Lyft is to help capture a portion of the market that was otherwise unreachable by the automotive giant: those who don’t want to own vehicles.

Because Lyft operates mostly in cities with higher populations, they serve a significant number of people that don’t have a car, nor do they want to deal with the hassles of owning a car. GM recognized that a partnership with an on-demand transportation service would be a great way to break into this market. Not to sell those people a car, but to still earn money from them as they utilize Lyft.

It also means that GM has to step up their game. Recently Google has partnered with Ford to build autonomous cars. Tesla has already made their vehicles drive themselves. GM has made reference that the Chevy Volt will drive itself sometime in the future, but in the rapidly changing technology landscape we have today, that’s just not good enough. The GM partnership with Lyft means that GM has to develop autonomous vehicles now.

What the Partnership Means for the Transportation Industry

Naturally the automotive industry isn’t the only one that will benefit from this partnership. Lyft would never take on a deal if it wasn't going to give their business a lift as well. But how does the on-demand car service benefit from this partnership? Two ways.

Lyft trails Uber dramatically in terms of popularity and revenue. Uber, valued at over $60 billion, claims to do 1 million rides per day (in 67 countries around the world). Lyft, with the latest investment, is valued at $5.5 billion and claims to do around 7 million rides per month (in the US alone). They need a boost of some sort to make sure that Uber is left with 100% of the market.

GM’s influx of capital, and, more importantly, their influx of autonomous vehicles, may give them the lift they are looking for. The idea is that from the consumer perspective it becomes a no brainer. You could use Uber and get a driver that you don’t know (while Uber drivers are screened, there is always the possibility of something going wrong) or you could get in an autonomous vehicle with state-of-the-art technology. Until the novelty of self-driving cars wears off, Lyft will have an advantage when it comes to which service to use.

What the Partnership Means for Consumers

When purchasing a vehicle, most people are fairly brand loyal. Some people are Chevy fans, others prefer Ford, some like Honda, and still others pick Toyota. Naturally each group claims that their preference is superior.

When renting a vehicle, most people are even less brand loyal. When using an on-demand car service, the top priority is that the vehicle is new enough, safe enough, and clean enough. Most riders could care less if they are in a Honda, a Ford, a Toyota, or a Chevy. However, there is the novelty of riding in an autonomous vehicle.

For consumers, the partnership between Lyft and GM means just one thing: more options when it comes to getting from point A to point B. It means that they can now choose an exciting new way to ride.

What consumers shouldn’t expect, however, is that Lyft will become cheaper because the driver is gone. Prices rarely go down, especially when so much money has been invested in the technology.

The Bottom Line

The GM and Lyft partnership is just the beginning of huge changes in the automotive industry. Traditional taxi cab services are diminishing (although not dying completely yet). Vehicles are changing every day, and many people would rather not pay the high prices for them. Uber and Lyft are growing in popularity, and eventually many people may find that it is more convenient (and cheaper) to use a service than to own a vehicle on their own. With self-driving vehicles, the on-demand car companies don’t have to worry about staffing, tired drivers, bad drivers, and the like.

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